Judicial Lifeline: Federal Court Temporarily Halts CFPB Changes

U.S. District Court Judge Amy Berman Jackson granted the plaintiffs' motion for preliminary injunction in NTEU v. Vought on March 28, 2025, primarily requiring the Consumer Financial Protection Bureau (CFPB) to reinstate all probationary and term employees. In a sweeping ruling, the injunction furthers the National Treasury Employees Union's (NTEU) intention of reinstating terminated employees and requiring Office of Management and Budget Director and CFPB Acting Director Russell Vought to continue the agency's business as usual. Specifically, the order 1) reinstates terminated probation and term employees, with a strict prohibition on enforcement or enactment of any stop-work order and 2) ensures that the agency is not dismantled by requiring all agency data to be maintained, sufficient office space or remote work capabilities for employees, continued resources for the centralized collection of consumer complaints and all notices of contract termination issued on or after Feb. 11, 2025, be rescinded. Vought and the CFPB have until April 4, 2025, to certify to the court that they have received actual notice of the order and are in compliance.

In a 112-page opinion, Judge Jackson's decision is in response to a lawsuit filed by the NTEU, representing employees who were fired in February 2025 in line with President Donald Trump's initiative to eliminate government waste and promote efficiency. (See Holland & Knight's previous alert, "CFPB Grinds to a Halt: Impacts on Industry," Feb. 26, 2025.) Judge Jackson believes the record reflects that "[a]bsent an injunction freezing the status quo – preserving the agency's data, its operational capacity, and its workforce – there is a substantial risk that" the agency will be dismantled prior to the court's opportunity to review the merits of the actions taken by Vought and the CFPB. To do so would be a violation of separation of powers, as only Congress has authority to make such a decision with respect to the operation of a statutorily created government agency.

The CFPB was created by the Consumer Financial Protection Act, part of the 2010 Dodd-Frank Act, which was enacted in response to the 2008 financial crisis. As a statutorily enacted agency, CFPB can be dismantled only by Congress. In contrast, Vought and the CFPB's actions to fire "all probationary and term-limited employees without cause, cutting off funding, terminating contracts, closing all offices and implementing a reduction in force (RIF) that would cover everyone else" amounts to evidence of the executive branch's effort to dismantle and eliminate the CFPB.

The order granting plaintiffs' motion for preliminary injunction was significantly focused on the totality of recent efforts taken by the Trump Administration to reform and reduce the CFPB. Judge Jackson referred to statements made by President Trump, Elon Musk, Vought and other government officials as evidence of the holistic view that the Trump Administration is presently attempting to unilaterally shutter the agency in violation of federal law and the doctrine of separation of powers.

Two weeks before Judge Jackson's order, in a similar case in the District of Maryland, Judge Matthew J. Maddox of the U.S. District Court for the District of Maryland denied a motion for preliminary injunction seeking to enjoin Vought and the CFPB from taking steps to defund the agency. Judge Maddox focused primarily on Vought and the agency's decision 1) not to request additional funding from the Federal Reserve and 2) reduce spending and programs.

Judge Maddox denied the plaintiffs' motion for preliminary injunction on the basis that Vought's and the CFPB's actions were not "final orders" ripe for review under the Administrative Procedure Act and any decisions that have been made were not arbitrary and capricious, but rather were supported by evidence of reasonable thought processes and in accord with the Trump Administration's goal of promoting government efficiency. In contrast, Judge Jackson viewed the matter as evidence of a larger scheme in place by the administration and that the actions taken did constitute a final order under the APA.

On March 29, 2025, the U.S. Department of Justice (DOJ) filed a notice of appeal of Judge Jackson's decision. The DOJ maintains the position that any actions taken by the agency and any larger-scale plans within the administration to restructure the CFPB are well within the executive branch's discretion to promote government efficiency while maintaining statutorily required programs. The DOJ will likely seek a stay of Judge Jackson's injunction pending full appellate review.

Critically, though Judge Jackson's legal findings are reviewed de novo, her detailed factual findings may not be disturbed unless "clearly erroneous." Considering the seemingly conflicting opinions from Judge Maddox and Judge Jackson, the U.S. Court of Appeals for the D.C. Circuit's review of this preliminary injunction will provide clarity over the scope of the CFPB's ability to make alterations to the agency's operations and spending in the coming months.

In the short term, it remains uncertain as to what percentage of CFPB employees – both those previously terminated and not terminated – have secured other employment, as well as what percentage of CFPB employees will actually return to work in light of this order. Additionally, it is not clear what work they will do.

Judge Jackson did not require the CFPB to support the validity of its regulations, continue work on proposed regulations or stop dismissing court cases, but that may be unsurprising as they would have been outside the scope of the lawsuit, which is focused on the issue of whether the actions taken unlawfully thwart Congress' decision to create and maintain the CFPB.

Though the future of the agency – and that of its employees – may still be an open question, this lawsuit may be at bottom an effort to delay things for a while.

Visit Holland & Knight's resource center, CFPB Dispatch: Legal Updates and Insights, to stay on top of the latest CFPB developments.